Georgia Institute of Technology School of Mathematics Spring 2008

Transcription

1 Georgia Institute of Technology School of Mathematics Spring 2008 COURSE ABBREVIATION: MATH 4801 CREDIT HOURS COURSE TITLE 1 semester hour Options strategies, techniques and nuances for the individual investor and floor trader PREREQUISITES An understanding of the mechanics of the stock market, investing in stocks and the basic concepts of calls and puts are required. REQUIRED TEXT Lawrence G McMillan. Options as a Strategic Investment. 4 th Edition. New York: New York Institute of Finance (NYIF), ISBN: Make sure to bring your textbook to class. We will be following the book closely. REFERENCE LIST The following books will be placed on reserve at the library. The course will reference these books for additional reading and to complement topics covered in the textbook 1. Lawrence G McMillan. McMillan On Options. John Wiley & Sons, Inc. New York, ISBN Sheldon Natenberg. Option Volatility & Pricing. McGraw Hill. New York, ISBN X 3. Nassim Nicholas Taleb. Dynamic Hedging. John Wiley & Sons. New York, ISBN Jay Kaeppel. The Option Trader s Guide to Probability, Volatility, and Timing. John Wiley & Sons. New York, 2002 ISBN X 5. Harrison Roth. LEAPS: What they are and how to Use them for Profit and Protection. Irwin Professional Publishing. Chicago, ISBN:

2 WEB SITES We will be surfing the web every so often during lecture time. Also students are expected to access the internet on their own for options quotes, educational material, software tools and databases. The following is a partial list of relevant websites Chicago Board Options Exchange. Option chains, product specifications, option calculator, option symbols, etc Chicago Mercantile Exchange. SPAN margin, E mini S&P 500, option on futures, etc London International Financial Futures and Options Exchange Graphs and risk tables of over 40 option strategies Interactive Brokers Margin requirements, trading platform, etc McMillan Analysis Corp. Access to Larry McMillan various learning tools, paid for services, commentaries, etc Optionetics education/seminars Discussion board, option trading educational material, market data, searches, etc Options implied volatility current and historical date 8. OptionsXpress Online discount broker for the option investor Access to option screener, volatility view, pricer, trade calculator, virtual trading and other tools Please sign up to the following Yahoo Group. This is where I will post homework, test solutions, etc. CATALOG DESCRIPTION This course is designed for students in the QCF program and for students interested in learning about the practical side of the world of options trading. Topics to be covered include call and put option strategies, the Greeks, synthetics, LEAPS, index options, options on futures, volatilitybased trading, arbitrage with options, taxation of options, the options marketplace and getting setup to trade options with real money. COURSE OBJECTIVE Upon successful completion of this course the student will have a good understanding of listed options products, strategies, risk parameters and trading techniques. Emphasis is on the practical every day aspects of options trading from the individual investor and floor trader perspectives. Theoretical and mathematical treatment of options is secondary in this course. Issues dealing with margin, taxes, trading fees, risk management, volatility and repair techniques are covered.

3 TENTATIVE LECTURE SCHEDULE Lecture #1 January 10 Chapter 1: Definitions Chapter 15: Put Option Basics Course Syllabus/Logistics Larry McMillan textbook and study guide The 6 option exchanges Lecture #2 January 17 Chapter 1: Definitions Continued Chapter 3: Call Buying Chapter 15: Put Option Basics Continued Discount brokers Options commissions Atlanta options investors club Lecture #3 January 24 Chapter 2: Covered Call Writing Chapter 16: Put Option Buying Options calculator Option chains Options software tools and websites Lecture #4 January 31 Test I Lecture #5 February 7 Chapter 4: Other Call Buying Strategies Chapter 5: Naked Call Writing Chapter 19: The Sale of a Put Margin: Reg T, Haircut, SPAN, Portfolio Margin Lecture #6 February 14 Chapter 6: Ratio Call Writing Chapter 7: Bull Spreads Chapter 22: Basic put spreads Lecture #7 February 21 Chapter 8: Bear Spreads Using Call Options Chapter 9: Calendar Spreads Chapter 17: Put Buying in Conjunction with Common Stock Ownership Lecture #8 February 28 Test II Lecture #9 March 6 Chapter 10: The Butterfly Spread Chapter 14: Diagonalizing a Spread Chapter 18: Buying Puts in Conjunction with Call Purchases Insights to floor traders and market makers

4 Lecture #10 March 13 Chapter 20: The sale of a straddle Chapter 21: Synthetic Stock Positions Created by Puts and Calls Chapter 23: LEAPS Lecture #11 March 27 Test III Lecture #12 April 3 Chapter 36: The Basics of Volatility Trading Chapter 37: How Volatility Affects Popular Strategies Chapter 40: Advanced Concepts Lecture #13 April 10 Chapter 40: Advanced Concepts Continued Position Analysis Iron Condors Review for Final Exam INSTRUCTOR Joe Murad H/W Fax joemurad@comcast.net Please feel free to contact me for questions or to arrange for help sessions. The best way to contact me is via . Office hours (either immediately before or after the weekly lecture) are by appointment only. COURSE GRADE Your final letter grade in the course is derived from 3 tests and a final exam. Each test weighs 20%. The final exam weighs 40%. Make sure to bring a calculator when taking a test. If you miss a test you must have a valid and documented reason to qualify for a make up. I am the final judge on whether, when missing a test, you had a valid reason and qualify for a make up. I will be posting suggested problems for each chapter we cover. It is not enough at all to just read the chapters. You must attempt the suggested problems and any similar problem you can put your hands on or come up with. Solutions to suggested problems will be posted. The final exam is mandatory and comprehensive. It covers all course material. All tests are multiple choice and closed book and closed notes. MEETING TIME/LOCATION The class will meet every Thursday for 12 weeks from 6:15 PM till 7:40 PM in Skiles Room 249.

5 IMPORTANT DATES Thursday 1/10 Thursday 1/31 Thursday 2/28 Friday 2/29 First Day of Classes Test I Test II Last day to DROP individual course(s) with a grade of W Thursday 3/20 Spring Break Thursday 3/27 TEST III Thursday 4/10 Last Day of Classes Thursday 4/17 Final Exam from 6:15 to 8:15 PM Note: Dates above are tentative and may be revised in class. Also please reference the school semester calendar for other important dates. ATTENDANCE POLICY It is very critical that you attend all lectures and participate in the class discussions. I will not be posting class notes.